Amazon India is firming up plans to launch a digital wallet as part of its efforts to build an online payments business, potentially through acquisitions, four people familiar with the development said.

Amazon’s largest domestic rival Flipkart launched its digital wallet last week as online payments increasingly become pivotal in the race for dominance in India’s ecommerce market, giving Internet companies greater control over transactions.

Amazon India is “looking at multiple acquisitions (in online payments). It is a major focus area and the company is trying to figure out what it needs to do”, one of the sources said, adding that the company has initiated acquisition talks with digital wallet and payments startups.

Amazon bought Noida-based payments services provider Emvantage in February, its first acquisition in India. The launch of Amazon’s digital wallet in India is likely a quarter away, another source said, declining to be identified as the others. Amazon previously launched a digital wallet in the United States, its home turf, in 2014 but shut it in six months.

Former Citibanker Sriraman Jagannathan, whom Amazon India hired in February to head its payments business, is likely to spearhead the launch of the digital wallet, said one of the people familiar with the plans. Jagannathan was instrumental in launching telecom operator Bharti Airtel’s digital wallet, Airtel Money, in 2012.

“Building own wallet helps it restrict access to customer data in the company’s ecosystem and monetise customer insights,” said another person familiar with Amazon India’s plans.

Amazon did not comment specifically on whether it plans to launch a digital wallet, only saying that it was “always exploring” acquisitions. “Payments are key to the ecommerce ecosystem,” said Srinivas Rao, director at Amazon Payments India, in an emailed statement.

“Developing a trusted, frictionless and ubiquitous payments ecosystem is critical to our customer-centric philosophy and we will invest in building the capabilities to drive our strategy.”

Currently, Amazon India uses its gift cards as pre-paid instruments for buying on its online marketplace, offering customers the option to top up these cards for up to Rs 10,000, which is the limit applicable to digital wallets under Indian regulations. This month, during its ‘Super Value Day’ sale, the etailer offered customers cashbacks on Amazon.in gift cards if they shopped for a specified minimum amount.

Amazon India’s gift cards are powered by Bengalurubased startup QwikCilver Solutions, in which Amazon picked up a minority stake in 2014. One source said Amazon may use QwikCilver, which has a licence to operate a semi-closed loop wallet, to launch its digital wallet. Adoption of digital wallets has been fairly quick in India.

The number of digiral wallet transactions more than doubled to 153.11million in the latest October-December quarter from 65.96 million in the corresponding year-earlier period, Reserve Bank of India data show. In value terms, the jump was to Rs 5,539 crore from Rs 2,226 crore.

Paytm, which is backed by China’s Alibaba Group, is the largest digital wallet business in India with more than 120 million users. Rivals include Snapdeal-owned Freecharge and cab aggregator Ola’s Ola Money, besides independent entities MobiKwik, Oxigen and Citrus.

Flipkart last week launched Flipkart Money, following its acquisition of FX Mart last year for Rs 48.5 crore. Flipkart's service is aimed at helping with refunds on cash-on-delivery transactions initially. Cash-on-delivery payments still account for a majority of Indian etailing transactions and on an average, 15% of ecommerce shipments end up in returns, according to experts tracking the industry.

(But) because friction of transaction is very high on mobile right now, from a merchant perspective it makes sense to offer all choices for payments,” said Sanjay Swamy, managing partner at early-stage investment firm Prime Venture Partners.